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Benchmark indices posted their biggest decline in nearly four months as foreign portfolio investors (FPIs) intensified their selling amid uncertainty around general elections in India and rate cuts at the US central bank.
The Sensex ended the session at 72,404, with a decline of 1,062 points, or 1.5 per cent, its biggest fall since January 2023. The Nifty closed at 21,958, following a decline of 355 points, or 1.5 per cent.
The index finished below its 100-day moving average (DMA), seen as a critical support, for the first time since November 13, 2023.
FPIs sold shares worth nearly Rs 7,000 crore, their biggest single-day pullout in nearly a month.
HDFC Bank, where FPIs have substantial holdings, fell 2.3 per cent and was the biggest contributor to Sensex’s decline.
Meanwhile, L&T fell the most amongst Sensex stocks and was the second most significant contributor to the index decline.
L&T fell as the firm said Indian elections and geopolitical tensions would hurt its order flows and revenue in the current financial year. Analysts also raised concerns that subdued government expenditure will likely affect the behemoth’s profits.
“Results have been a mixed bag with a fair share of downside rather than upsides in earnings. The corporate results haven’t surpassed expectations. Valuations are becoming more stretched. Analysts are cutting target prices or reducing their position from buy to hold. And some are becoming positive about China, and maybe some are taking money out of India to China,” said Andrew Holland, chief executive officer of Avendus Capital Alternate Strategies.
The India VIX, a measure of market volatility, rose for an 11th day to end the session at 18.2.
Concerns about the Bharatiya Janata Party getting fewer seats than what markets have priced in have rattled investors amid a dip in voter turnout in the first three phases. Investors are now concerned about whether the ruling coalition will have enough numbers to carry out policy reforms swiftly.
“Given the size of the electorate and diversity no one has a realistic idea about the election results. We are seeing a natural jitteriness on the part of markets after a one-way bull run post-pandemic. A degree of nervousness is inevitable going into a big event like the elections,” said Saurabh Mukherjea, founder and chief investment manager of Marcellus Investment Managers.
Going forward, the remainder of the corporate results, the geopolitical tensions in the Middle East, and the rate hike outlook in the US, which are significant global factors, will determine the market trajectory.
The market breadth was weak with 2,998 stocks declining and 843 advancing on the BSE. Apart from L&T and HDFC Bank, Reliance Industries which fell 1.7 per cent, and ITC, which dropped 3.6 per cent, were the big contributors to Sensex decline. Oil and Gas declined the most and its index on BSE fell by 3.4 per cent.
